Green Investment Bank

Written evidence submitted by the Creativity Partnership (GIB 06)

Executive summary

· The concept of a Green Investment Bank is welcome if it helps create and channel new sources of finance to "green" the UK.

· It is vitally important that by consolidating the activities of other funding bodies it does not accidentally divert what little investment finance there is away from innovation and into infrastructure. Funding for "green innovation" is as important as funding for "green infrastructure"

The submitter

I am Anne Miller, Director of The Creativity Partnership www.tcp-uk.co.uk where I provide training, workshops and consultancy to help organisations get value from creativ ity (often this relates to issues such as low carbon, clean tech and sustainability ). Clients range from major corporations to SMEs and individual entrepreneurs.

I am also a co-founder of TTPGroup, now one of Europe’s leading independent technology innovation organisations www.ttpgroup.com ; founder and coordinator of the Green Enterprise Community www.green-enterprise.org , a community of over 80 early stage "green" entrepreneurs; one of the UK’s most successful female inventors with 39 patents, many of them commercialised; and author of the acclaimed book, How to got your ideas adopted (and change the world) www.anne.miller.info

This gives me real expertise and insight into the issues facing the UK’s innovators, and the barriers facing them as they try to develop the ideas and enterprises that will lead the UK to a prosperous and low carbon future.

The facts

The UK has real strength in creativity and innovation: we punch way above our weight in terms of the amount, diversity and significance of UK inventiveness (from the Beatles to the Body Scanner). This is recognised internationally.

Our weakness is in the exploitation of that inventiveness: lack of finance for innovation often means that innovations have to go overseas to be exploited, and hence UK plc only gets a small proportion of the value that our innovators create.

In today’s climate, what finance is available for small business is poorly suited to entrepreneurial activity. A bank loan to support liquidity secured on assets is of little use to an innovative small business that really needs capital that can be subject to risk [1]

Historically, where sources of finance existed that genuinely understood the innovation process, the results were transformational. For example the well known Cambridge Phenomenon took off in 1978 when Matthew Bullock of the Cambridge branch of Barclays Bank persuaded the bank to let him adopt a positive policy towards "high tech" businesses in the locality. This started a process that converted one of the poorest regions in the UK into one of the richest. Whereas 30 years ago there were about 100 people employed in high tech firms in the Cambridge region, today there are over 40,000 people employed in knowledge based business and over 1500 high tech companies [2] .

Although currently the investment climate is tough for innovators, two small but useful schemes are the SBRI programme, run by the Technology Strategy Board [3] and grants provided through the Carbon Trust’s Entrepreneurs Fast Track scheme [4] .

We hear concerning rumours [5] that as part of the spending review, the Carbon Trust and even the Technology Strategy Board may cease. Alternatively we hear that the "green" funds they administer may be rolled into The Green Investment Bank (GIB), but that the GIB will itself focus on financing major capital infrastructure projects. As the Utility sector is one of the least innovative sectors in the UK economy (and SME’s tend to be the most innovative), this change would leave the UK’s innovators and green entrepreneurs stranded.

R ecommendations

I strongly support the general principle of a Green Investment Bank, but urge the committee to ensure that it devotes a substantial proportion of its funding to supporting entrepreneurs and innovative SMEs in the Green Sector. It is vitally important that the creation of the GIB doesn’t divert existing funding away from innovation into infrastructure.

If the Carbon Trust and TSB are to be closed, this could be done at its simplest by "relocating" the SBRI programme and the Entrepreneurs Fast Track scheme within the GIB.

Preferably however, the creation of the GIB would result in an increase in the availability of informed finance for green entrepren eurs and innovative SMEs. If 5 % of the GIB’s lending were allocated for "green innovation" by SMEs it would be transformational.

This would also be good for the GIB’s finances because , as Venture Capitalists know, a well managed portfolio of investme nts in genuinely innovative SMEs deliver s a far greater return than the equivalent sum invested in supporting the activities of a major corporation.

This "green innovation" investment programme should be designed and run by investment managers that understand the needs of innovators and have the experience to develop an exciting and profitable portfolio .

Unlike major co rporations, green entrepreneurs and innovative SMEs have limited resources, so are unable to undertake the lobbying activities that are no doubt going on behind the scenes to influence the investment priorities of the Green Investment Bank. We therefore need the Environmental Audit Committee to take care to ensure that the creation of the GIB doesn’t accidentally handi cap the UK’ s ability to compete in the green innovation race that’s to come.

1 3 October 2010


[1] New Economic Foundation “Where did the money go: building a banking system fit for purpose” p44

[2] http://siteresources.worldbank.org/EXTECAREGTOPKNOECO/Resources/PS_IV_W_Herriot_Replicating_the_Cambridge_Phenomenon.pdf

[3] ht p://www.innovateuk.org/deliveringinnovation/smallbusinessresearchinitiative/whatissbri.ashx

[4] http://www.carbontrust.co.uk/emerging-technologies/fast-track/pages/default.aspx

[5] http://www.telegraph.co.uk/finance/newsbysector/energy/7863253/The-Green-Investment-Bank-is-going-down-the-wrong-path.html

[5]